The billion dollar clock

by Tim Querengesser

The clock is ticking in Northern Alberta. What happens as it counts down in the coming weeks could set a precedent on relations and regulations between aboriginal governments and industry, as one major player stands to either profit or, potentially, plummet.

This week, the Fort McKay First Nation made good on its pledge, as reported by this blog, to seek a higher court’s ruling on its demand for a 20-kilometre buffer zone around its reserve lands and the Dover Commercial Project, a joint venture between Athabasca Oil Corp. and PetroChina that would result in a 250,000-barrel-per-day thermal oil sands project. The First Nation has officially filed a request for permission to appeal the Energy Regulator decision with the Alberta Court of Appeal.

Last month, the Alberta Energy Regulator denied Fort McKay’s request for the buffer zone in its decision that conditionally greenlighted the project, ruling that the buffer would exclude 1.2-1.4 billion barrels of bitumen from production. This, it argued, meant that the economic impacts of creating a buffer on Alberta and the Wood Buffalo region “are significant and would not be in the public interest.”

This week, Athabasca vice-president Andre De Leebeeck told the Globe and Mail that he expects the approval process for the Dover project to continue – somehow – at the same time as whatever appeals pop up. The final decision on whether the project proceeds will reside with Alberta’s environment minister, Diana McQueen.

This might be a case of wish-casting, however. De Leebeeck has good reason to hope approvals and appeals can happen concurrently: Athabasca’s partner in the project, PetroChina, already owns 60 per cent of it, and the conditional approval by the Alberta Energy Regulator kicked off a process, with rigid time limits, for the Chinese company to purchase the remaining 40 per cent for $1.3 billion.

Athabasca would use this influx of cash to fund its many other projects next year. And that means if delays via appeals are introduced, the company stands to lose, big time. Indeed, RBC Dominion Securities analyst Mark Friesen picked up on this point. As reported in the Globe and Mail, in a note this week, Friesen said the “best case scenario” for Athabasca would be reaping the PetroChina option by November or December. Why? “Without receipt of the option proceeds, [Athabasca] would be unable to fund its 2014 capital program. Management has not articulated any alternative financing options for the 2014 capital budget.”

It remains to be seen if all the other cogs in the regulatory machine share Athabasca’s sense of urgency, or whether they see an appeal as a sign that the approval machine must be stopped for the First Nation’s grievances to be given adequate hearing. And so the clock ticks. Watch this space.